Brazil qualifies over 11 GW of solar PV projects for upcoming auction

On Tuesday, Brazil’s Power Research Company (EPE) announced that it has qualified 341 solar PV projects totaling 11.3 GW for a national solar-only reserve auction to be held on August 28. This represents 90% of the 382 projects which initially applied.

The largest number of projects is in the state of Bahia, with 125 projects representing nearly 4 GW of capacity. Second is Piauí, where 61 projects represent 2.08 GW of capacity, however more than 1 GW of projects were qualified in the states of Pernambuco, Rio Grande do Norte and São Paulo.

GTM Research notes that the exact capacity of PV which will clear the auction is yet to be determined, with clearance levels based on the allocation cap and the viability of bids. Brazil’s Ministry of Energy’s has called for 500 MW of solar annually through auctions in its most recent ten-year plan, and more recently has called for 2-3 GW of solar to be procured between 2015 and 2018, which would put the annual number higher.

EPE is optimistic. “The large number of projects approved will permit strong competition in the acution, which will benefit consumers” confirmed EPE President Mauricio Tolmasquim. EPE also noted that the capacity qualified was similar in scale to large hydro projects, such as the Usina project in the northeastern state of Alagoas.

GTM Research also says that the auction is a good sign for Brazil’s PV sector. “This auction demonstrates the government’s willingness to acknowledge the specific value solar can bring to the grid as they diversify their electricity production,” states GTM Research Senior Solar Analyst Adam James.

However, James also notes that like other auctions in Brazil, approval is only the first step. “The projects that clear in the auction will still need to overcome some barriers to development, especially currency risk with power purchase agreements signed in Real and high taxes on PV equipment,” explains James.

This reserve auction is the first for PV projects this year in Brazil. The maximum price set for the auction is 349 Real (US$ 95.70) per megawatt-hour. “While the ceiling price is not too low, I’d note that the currency and tax issues create a de facto high floor price for these bids — below which projects will not be profitable,” warns James.

Projects which are chosen need to be put online in 2017. GTM Research expects over 1 GW to be installed during that year, but also notes a strong up-side risk pending a successful auction and viable means for project deployment.

Last year, 1 GW of projects were awarded in Brazil’s first national auction for solar PV. This year the nation will hold another reserve auction in November for solar PV.

The mid-term outlook for solar in Brazil is strong. GTM Research expects 5.7 GW to be installed in the nation by 2020, with 96% of this coming online after 2016.